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A third of power from Canada's oil sands wiped out by wildfire

[NEW YORK] Electricity flowing from plants at Canada's oil sands operations has shrunk by almost a third as a wildfire ravages the region, forcing tens of thousands of people to evacuate in what may become the country's costliest catastrophe.

Cogeneration plants that use the steam from Alberta's oil sands production were supplying 950 megawatts of power to the region at about 7 pm New York time on Thursday, electricity grid data compiled by Bloomberg show. That's down 29 per cent from three days ago. Natural gas output in the province has meanwhile dropped by a half-billion cubic feet a day since late April, data compiled by Bloomberg New Energy Finance show.

While the fire may affect more than a million barrels of oil sands capacity a day, the power and gas drop-offs show how the impact of a blaze wreaking havoc in Canada's most energy-rich region extends beyondits crude supply. Pipeline operator TransCanada Corp said it has seen a slight decline in gas demand as people leave the area and customers scale back operations.

The volume of gas burned by oil sands companies may shrink by 150 million to 300 million cubic feet a day, according to New York consulting firm Pira Energy Group.

"The wildfires southwest of Fort McMurray have caused significant output reductions in the oil sands, which will have some gas demand and site-related power load implications," said John Ell, senior natural gas analyst at Pira Energy Group in New York. "There's potential for a two- to three-week production decrease until crews are able to return safely to their respective facilities, once given the all clear."

SUNCOR, NEXEN

The cogeneration plant at Suncor Energy Inc's MacKay River oil sands complex was supplying a single megawatt on Thursday, down from as much as 177 megawatts earlier this week, data from the Alberta Electric System Operator show. Flows from a 220-megawatt plant at a site run by Cnooc's Nexen that had been falling since the weekend reached zero on Thursday.

Both of the companies are among those that have halted or curtailed production in the region, based on company statements.

A shutdown at Royal Dutch Shell Plc's oil sands operations has also contributed to the declines, Mr Ell said.

"If we see less power hitting the grid that means the facility is slowing down," Het Shah, a Bloomberg New Energy Finance gas analyst, said by e-mail.

The fires may threaten nearby electric transmission lines, as there are two high-voltage ones running between Fort McMurray and southern Alberta, Mr Ell said. "One of those appears to be turned off and not yet returned to service," he said, adding that an outage may limit exports into British Columbia and Montana.

Spot natural gas at a hub in Alberta fell 3.6 per cent on Thursday to US$1.07 per million British thermal units, data compiled by Bloomberg show. It had closed at a nearly seven-week high a day earlier.

BLOOMBERG